Economy

With inflation spiralling out of control, central banks are hiking interest rates, provoking recession. The ruling class is increasingly split, as the crisis of capitalism deepens. Only socialist revolution can provide a way out of this impasse.

Defenders of the free market look towards libertarians such as Hayek and Mises – and their assertion of an ‘economic calculation problem’ – in order to attack socialism. But in truth, Marxists answered these reactionary arguments long ago.

Last month, under conditions of extreme economic turmoil, the Sri Lankan masses burst into the presidential palace in Colombo, forcing hated president Gota Rajapaksa to flee and, soon after, announce his resignation. It immediately prompted the most frantic discussion amongst representatives of the ruling class, who are terrified of similar events occurring elsewhere.

The world economy is wracked with turbulence, buffeted by a perfect storm of war, pandemic, and protectionism. A toxic combination of inflation and recession looms for capitalism. This is a finished recipe for revolutionary explosions everywhere.

Earlier this month, a collapse on the scale of the largest crashes in recent history rocked markets. The Nasdaq stock exchange fell by almost 30% in one week, and the market capitalisation of cryptocurrencies simultaneously fell by 50%. Hundreds of billions of dollars were wiped out in just seven days. Since then, there has been no recovery.

The crisis in Ukraine has created a perfect inflationary storm. The war, the western sanctions on Russia, the pandemic, protectionism and climate change are unravelling decades of low commodity prices in a crisis that is only getting deeper.

In 2020, central banks responded to the outbreak of the crisis by pouring some $10 trillion of printed money into the economy. In what measured and responsible way did the markets react to such an unheard of cash injection? By engaging in an orgy of speculation without precedent in capitalism’s history!

Along with bankers and capitalists, the landlord class is especially despised. They are regarded very much as greedy speculators, rack-renting owners, who force up rents at the earliest opportunity and cream off a section of the surplus-value created by the working class. It is clear why disdain for them is rising. In Britain alone, rents and housing costs account for up to a half – sometimes more – of the disposable income of working people, which has become an intolerable burden, especially for those who live in the capital.

The strategists of the bourgeoisie had imagined that the Covid-19 shutdowns had merely put an already fragile world economy on pause. Once the economy reopened, it would merely be ‘unpaused’ and would proceed to stagger on as before. This is far from how things have turned out in reality. The world economy is now in the grip of chaos.

At present, 800 million people are not eating sufficient amount of food, and 45 million are on the brink of starvation. This is a striking indictment of a society where the richest earned $4tn in the first year of a global pandemic.

Across the world, businesses are facing a severe shortfall of workers, leading to a standstill in production and a breakdown in supply chains. The capitalist market means anarchy and crisis. Only socialist planning can offer a way forward.

In the past months, the world economy has been creeping towards a state of disarray. Shops have been running out of goods, gas stations have been running out of gas, energy prices have shot up and major western harbours have become completely clogged up with swarms of ships queuing up, sometimes having to wait weeks to unload. Just as we were told that the Covid crisis was over and that life was bouncing back to normal, the world market is feeling the drag of a series of converging crises.

A data leak containing millions of documents amounting to 2.94 terabytes of information has partially lifted the curtain on the offshore deals and assets of more than 100 billionaires, world leaders and public officials. This leak has exposed the tremendous parasitism of the ruling class, totalling anywhere from US$5.6 trillion to US$32 trillion in offshore wealth.

It is undeniable that the pandemic has hammered the final nail into the coffin of the previous epoch. But jubilant claims that austerity is a thing of the past have proved premature, as the ruling class begins to wind up its COVID spending spree and resume attacks on workers. The question is, what is the character of this new period, and what will it entail for the working class?

The 2008 crash and coronavirus crisis have revived interest in the theories of J.M. Keynes, the liberal English economist. But a look at Keynes’ life and ideas show that he was no friend of the working class. We need socialism, not Keynesianism.

A revealing new Credit Suisse report has exposed how in 2020 the ‘millionaire club’ grew dramatically, despite capitalism being on life support, as wealth inequality rose massively. The USA saw the creation of 1.73 million new millionaires; Germany, 633,000, and Australia over 300,000.

The pandemic has had the effect of intensifying the crisis of overproduction that began in 2008, further exacerbating the contradictions of the capitalist system. As a result, we are witnessing a sharp change in the policies being carried out by the ruling classes of the main imperialist countries. Austerity, the economic policy of the last few years, has been temporarily put to one side. It would have been economically and politically unsustainable to carry on with austerity policies under the current conditions.

Governments across the world have spent the last year propping up the capitalist system with unprecedented state support. But these desperate measures have built dynamite into the foundations of the world economy – which is now set to explode.